Income Tax Explained – 2025 Budget
The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduced major changes to India’s income tax structure. The government has revamped the new tax regime, increasing the income tax exemption limit and adjusting tax slabs to benefit the middle class.
This blog explains income tax rates, exemptions, deductions, and key changes introduced in Budget 2025.
1. New Income Tax Slabs for FY 2025-26
The revised new tax regime now has higher exemption limits and lower tax rates:
| Annual Income | Tax Rate (New Regime) |
|---|---|
| Up to ₹4,00,000 | No Tax (0%) |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key Takeaways:
- Tax-free income limit increased to ₹4 lakh from ₹3 lakh.
- Standard deduction increased from ₹50,000 to ₹75,000.
- ₹12.75 lakh annual income (including standard deduction) is now tax-free.
- A new 25% tax slab introduced for incomes between ₹20-24 lakh.
2. Comparison: Old vs. New Tax Regime
The old tax regime still allows deductions under Section 80C (Investments), 80D (Health Insurance), HRA, Home Loan Interest, etc.
However, the new tax regime does not allow these exemptions, offering only a higher standard deduction instead.
| Income | Tax in Old Regime | Tax in New Regime (2024-25) | Tax in New Regime (2025-26) |
|---|---|---|---|
| ₹7,00,000 | ₹0 (With 80C + 87A Rebate) | ₹0 | ₹0 |
| ₹10,00,000 | ₹52,500 | ₹60,000 | ₹30,000 |
| ₹12,00,000 | ₹1,17,000 | ₹90,000 | ₹60,000 |
| ₹15,00,000 | ₹1,95,000 | ₹1,50,000 | ₹1,20,000 |
| ₹20,00,000 | ₹3,12,000 | ₹3,00,000 | ₹2,40,000 |
Key Takeaways:
- New Regime offers lower tax rates but no deductions like 80C, 80D, HRA, and home loan interest.
- Salaried individuals benefit more from the new regime with higher standard deduction.
3. Major Tax Reforms in Budget 2025
The Union Budget 2025 introduced several tax-related changes:
✔️ Higher TDS Limits for Senior Citizens
- TDS exemption on bank interest increased from ₹50,000 to ₹1,00,000 for senior citizens.
✔️ Higher Rent TDS Limit
- Annual TDS on rent limit increased from ₹2.4 lakh to ₹6 lakh, benefiting landlords.
✔️ National Savings Scheme (NSS) Withdrawal Tax-Free
- Withdrawals from NSS (National Savings Scheme) post-August 29, 2024, will be tax-exempt.
✔️ Income Tax Return (ITR) Filing Extended
- Updated ITR filing period extended from 2 years to 4 years.
✔️ New Income Tax Bill
- The government announced plans for a simplified income tax bill to reduce compliance burdens.
4. Who Benefits from the Budget 2025 Tax Changes?
✅ Middle-Class and Salaried Individuals
- Higher tax-free income (₹12.75 lakh).
- More savings with lower tax rates.
✅ Senior Citizens
- Higher TDS exemption on interest income (₹1 lakh).
✅ Landlords & Property Owners
- Higher TDS limit on rental income (₹6 lakh).
✅ Business Owners & Freelancers
- Lower income tax rates under the new regime.
5. Should You Choose the New or Old Tax Regime?
| Best for | Old Tax Regime | New Tax Regime |
|---|---|---|
| High Investments (80C, 80D, HRA, Home Loan) | ✅ Yes | ❌ No |
| Low or No Investments | ❌ No | ✅ Yes |
| Salaried Employees | ❌ Better New Regime | ✅ Yes |
| Senior Citizens (Higher TDS Exemption) | ✅ Yes | ❌ No |
| Business Owners & Freelancers | ❌ Less Deductions | ✅ Yes |
🔹 Quick Tip: If you claim multiple deductions (80C, 80D, HRA, Home Loan), the old regime may be better. Otherwise, the new regime offers lower taxes.
6. Conclusion – Budget 2025 Brings Relief for Taxpayers
The 2025 Budget brings huge tax relief for middle-class taxpayers with higher exemptions, a bigger standard deduction, and reduced tax rates. The new tax regime is now more attractive for salaried individuals.
💡 Key Benefits of Budget 2025 for Taxpayers:
✅ Zero tax on income up to ₹12.75 lakh (new regime)
✅ Lower tax rates for incomes up to ₹24 lakh
✅ Simplified tax filing with extended return deadlines
✅ Senior citizens and property owners get TDS benefits
👉 What Should You Do Next?
- Calculate your tax under both old and new regimes.
- Check if you benefit more from deductions or lower tax rates.
- Plan your investments and expenses accordingly.
